This site may earn affiliate commissions from the links on this page. Terms of use.

Late yesterday, Apple (AAPL) announced record earnings of $57.6 billion for the last quarter of 2013. The company sold a record number of iPhones (51 million) and a record number of iPads (26 million), both of which contributed to a very healthy profit of $13.1 billion. By almost every measure of financial success, Apple is doing extremely well. Why, then, on the back of record earnings, did Apple’s stock price tumble almost 10%? Why, after being one of the most successful companies in the world for the last 10 years, has its stock price been trending downwards for almost two years? For some reason, despite being one of the most popular, well-known, and desirable brands in the world, nothing Apple does ever seems to be good enough.

The short answer is that Wall Street is a cruel and unforgiving mistress. For two years now, the stock market has been waiting for the next iPhone or iPad, and it simply hasn’t come. As a result, as you can see in the graph below, Apple’s earnings rose meteorically on the back of the iPhone and iPad — but for the last two years, without a new profit driver, growth has trailed off dramatically. Between December 2009 and December 2011, Apple’s revenue tripled from around $40 billion to $120 billion per year; between December 2011 and December 2013, Apple’s revenue only grew by another $40 billion.

In short, Wall Street is mostly concerned with future growth, and the weakness in Apple’s stock value is basically a sign that the stock market is increasingly uncertain about whether the company can produce another breakout hit. For what it’s worth, Apple’s stock valuation went through a similar lull a couple of years after the iPhone was released but before the iPad.

It is due to this flattening curve that we’ve had to put up with dozens of weird product rumors over the last couple of years. At first the rumor mill was certain that a large-screen Apple iTV was in the works. Then there was an Apple smartwatch. And, of course, there’s the insistent belief that Apple is always on the verge of releasing a large-screen iPhone to compete with Samsung and other Android device makers. In reality, Apple’s only new product lines since the iPad are the iPad Mini and iPhone 5C. The Mini has done quite well (though it hasn’t budged the company’s stock value), but the 5C — Apple’s first major release under Tim Cook’s leadership — appears to be a bit of a non-entity. Speaking at Apple’s earnings call yesterday, Tim Cook was very euphemistic about the success and future of the iPhone 5C: “It was the first time we ever ran that play [iPhone 5S and 5C], and demand percentage turned out to be different than we thought.” He then talked about how the relative failure of the iPhone 5C wasn’t actually all that bad, because it provides a “new to iPhone” data point which will help future planning.

The iPhone 5C, despite coming in a lovely range of colors, hasn’t been the critical success that Apple was hoping for

Uncomfortable impasse

The truth is, Apple is experiencing the same thing that almost every maturing company goes through. It is very, very rare for a company to continue a stratospheric climb for more than a few years. Usually, a company bursts onto the scene with a new and exciting product, quickly climbs up the stock market ladder as its product grows in popularity… and then, as that market sector matures (desktop PCs, smartphones, computer chips), the stock value stagnates. It is exceedingly rare for a company to have more than two or three breakout hits. Microsoft enjoyed the same kind of success in the ’90s and early ’00s on the back of Windows and Office, but it’s still waiting for its next smash hit (which may never come). Ditto Intel, Cisco, and numerous other Silicon Valley and Dotcom bigwigs.

In short, we shouldn’t be surprised if Apple can’t deliver another iPhone-like profit driver. Some might look to Apple’s hiring of Burberry CEO Angela Ahrendts as an indication that some kind of iWatch is on the horizon, but it’s more likely just a case of Apple bolstering its retail division (which is a huge profit driver for the company). Tim Cook is obviously looking for that next product, but we would be wise to temper our expectations. It took Apple over 20 years, many false starts, and the re-hiring of Steve Jobs, to finally come up with the iPod and iPhone. Our fevered zealotry convinces us that Apple must surely be on the cusp of releasing the Next Big Thing, but in reality there’s a good chance that Apple has peaked and will now join the Microsofts of the world — producing fat profits, but not much more.

Tagged In

Great writing Sebastian, but consider the possibility of a new innovation. It may look remote, but this company has a history of innovation. You can’t put it on a production schedule, but it is still possible.

http://www.mrseb.co.uk/ Sebastian Anthony

Yeah, my problem with that POV is that… well, it’s just blind, almost religious-like belief that Apple can innovate where others can’t. Once, Microsoft was an innovative company that could do no wrong. Ditto Intel. Ditto many other huge companies.

But it’s SO hard to create the next iPhone or Windows or Internet. You have to get SO lucky. Apple has an advantage because it has great mindshare and (I assume) some of the industry’s best talent. But I still wouldn’t be surprised if the iPhone marked Apple’s zenith.

Thanks for taking the time to comment!

Ivor O’Connor

I don’t think they have or had any great products. What they had was a great salesman. A person who could put magic unicorn dust on anything and everything. Without a person at the top to connect with the lemmings a company becomes driven by committee and Harvard grads driven by wall street. We all know how that turns out. (Look at Detroit.) Unless Apple gets a magic man at the top we can expect more of the last two years…

Avril111

My Uncle Harrison recently got Infiniti Q50
Sedan from only workin part time on a home computer… go to this website
J­u­m­p­6­2­.­ℂ­o­m

Mark

A history of innovation… With Steve Jobs.

disqus_IqWc3fhtsg

Yup, the company that started off by copying Xerox is certainly really innovative.

James Tolson

i hate them personally, i used to love apple in the old days, but this whole “app” and microtransaction culture we are in now is down to them.. first with the ipod and iphone landfill devices, then itunes and appstore thing after. they must make gazillions from all their ignorant customer base.. it fustrates me because it is like they are selling class a drugs and brainwashing people to buy into their closed market and once in they cannot escape.. google and microsoft are copying them because it junst seems like a frenzy of money to be made on these “platforms” and Micro payment scams when they get a piece of it.. sometime i think its like invasion of the body snatchers and im the only one left :-(

Ray C

I think it will only continue. We might even eventually see a revenue dip. I think people are finally starting to get over their iPhase just a little bit. iDevices used to be like Bentleys or Rolls Royce. They were the device that everyone wanted because they thought they couldn’t get it. Now it’s kind of more like a Lexus or Chrysler. It’s still out of or should be out of range for some people, but people are still getting them or getting older models and finding out they’ve hyped it all these years for nothing. People are starting to realize that other companies actually do make good products, so it puts even more pressure on Apple to do something special. We’re starting to see that maybe their products aren’t that much more special or better than everyone else, like we once thought. But they will be fine for quite some time. Most of the tech industry and media is still run by people who are big time Apple fans and will hype up just about anything they do

WatDah

I’ve used every brand out here. There’s really only 2 options: Apple or Android. All Androids are basically the same, just with a different hardware setup. And while people might think they have so much more choices with Android, in reality they are just choosing which brand to go with. And after using as many brand as I have (Apple, Nexus, Samsung, LG, Moto, HTC), I went right back to the iPhone. All that customizing and “trying to be different” features are mostly impractical in real world situations. I found that iOS is much, much more refined. And it makes my day easier with less headaches. To each their own.

Singh1699

Idk, my resolution is almost 4 times higher, and I can type in my own language. Plus custom rom, huge battery and more hardware power.

Plus the pen features are great and I would a larger screen not smaller than note 3

WatDah

Good for you, you found what you like. For me, a higher resolution doesn’t even make any difference on a mobile device, except it uses more battery. I don’t see the difference, nobody really does. I can also type in any language, as well as using my voice to type in all the languages I speak. Custom roms? Why do you need to install them in the first place? You phone doesn’t work properly out of the box? I never had any issues with iPhone’s battery, it runs all day. Especially since I work indoors where there’s always a computer or wall plug if I really need to charge. I also found iOS to run very smoothly no matter what I throw at it. Hardware power and software runs in perfect harmony.

Singh1699

Ios only has European and east asian languages. Samsung has Punjabi or ਪੰਜਾਬੀ. I have 20/15 vision so I don’t know if it’s me but I do notice.
I also don’t want a small phone, because I do many formerly pc exclusive tasks like commenting on this for example.
I like to be able to control what goes on; we’re not quite at the point where for me all tech is powerful enough except for niche circumstances.
Apus are getting us there, and I see your point of view as well. I like Android though, I’m satisfied for the next few years with it and I’ll see my options then.
To you this is a work device, like my old blacberry Z 10. In thay case, you are correct why install a custom rom? For me this is a gadget and more than just work.
Even the lock screen customization android alone offers makes me choose over others. As for security, Snowden showed that it doesn’t exist.
The old philosophy of nothing on the Internet is secret applies.

WatDah

That’s great. Glad you’re using what suits you best.

Singh1699

Also I have a samsung, that’s why I put a rom. If this was stock Android I wouldn’t, because I don’t even bother with clock and voltage settings.

1080Degree

Let’s step back and look at the bigger picture, the thirst of humans cannot be quenched with a single cup of water, we have to keep drinking till we die. This is why success can either be singular or infinite, no one can succeed forever we have to die eventually. So why do we keep trying?

Addictootech

david

stock prices are first derivative of profit curve …

Pickybugger

I’m quite interested to see how the new rumor about iPhone 6 pans out. Even though I’m more inclined to get a galaxy s5 at this point. But I read that the iPhone 6 will come with a Sapphire glass screen with inbuilt solar charging capabilities, as to how effective it is remains to be seen.

Apparently Alcatel has demoed a mobile phone with a practically transparent solar panel over the screen at CES already so Apple wouldn’t be the first company to implement it, however the almost scratch proof sapphire glass part of the equation would trump that. (only diamond could scratch it so you could say goodbye to screen protectors with dust bubbles underneath)

A couple of things I can see that would be problematic are that the screen wouldn’t be fully transparent and leaving the phone exposed to direct sun light may cause over heating of components, if they find solutions to these issues however it may be a real selling point.

Singh1699

If they don’t up the resolution though, samsung will have 8x more.

Singh1699

I know people buy the retina display thing, but I’ve read that as pixel density increases things become more lifelike period.
In two years samsung says it will have 8k. I want to upgrade to that. :D

This may not matter in America, the only country in the world. But in most of Asia and Africa, no one uses Apple products. No ONE!

chojin999

Not good enough? WHAT? All internet sites attacking Apple like it turned into another Blackberry…
Lies and more lies… Is Google, Samsung or Microsoft behind these lies ?
One can only wonder..
The only real fact is that Apple has 70% of the whole smartphones and tablets market .. while all Android manufacturers+WindowsPhone have to share a 30% ..
Same is true for iTunes and App Store too.

HeWhoGameZ

Hopefully, as Apple has repeatedly said, they will continue to make great products. I love the iPhone, iPad and Apple TV. I loved the iPod when it came out along with the Macintosh. Apple hopefully has another trick up it’s sleeve that will boost it’s stocks and introduce great products while they are at it.

HeWhoGameZ

Hopefully, as Apple has repeatedly said, they will continue to make great products. I love the iPhone, iPad and Apple TV. I loved the iPod when it came out along with the Macintosh. Apple hopefully has another trick up it’s sleeve that will boost it’s stocks and introduce great products while they are at it.

billym67

It’s simple, really. Apple lost its creative spark when Jobs died. When Apple made the first iPod and iPhone, they took a product that was already on the market and made it much, much better than the competition. Unfortunately, they have not done that or anything
original in several years, instead playing catch up to Android. If they continue to do this their sales will soon follow their stock down, until they become the new Microsoft.

Robin De Villiers

Apple was a newcomer to the phone market at a time when no one and I mean NO ONE in the phone market was innovating. Take one look at Nokia’s share price and recognise that they deserved what they got.

The iPhone revolutionised the phone in two major ways, the touch screen and the online app store. I call them revolutionary, but it doesn’t take much to think of these things. The entire economy, industry, the times themselves where crying out for these innovations, and anyone could have done it, but Apple did do it.

Today its the same. The smart TV concept can offer so much more. Augmented reality is just around the corner. Having a phone be a pc and be a car navigation computer all depending on context… another idea just begging to happen.

What Steve Jobs brought to the party was a vision and a passion for technology. Steve Jobs was known as an egotistical prima-donna who wouldn’t accept second class crap. That has been lost at Apple. What Tim Cook wants is profits. Look at his career, he is all about industrial product lines. His contribution is to outsource production to China to produce cheaply to take larger profit margins. The first product released after Jobs was a cheap knockoff of an iPhone. This fits perfectly with Cook. I wouldn’t expect anything dramatic from them.

This site may earn affiliate commissions from the links on this page. Terms of use.

ExtremeTech Newsletter

Subscribe Today to get the latest ExtremeTech news delivered right to your inbox.